Deceptive advertisements can cost your company a pretty penny

We have all been the target of spam and questionable advertisements, whether through the mail or by electronic means like email, and have likely paid them little attention. Businesses may believe that this is a norm in today's society and that there is no harm in including an innocuous exaggeration or some little-white lies in their advertisements. However, the cautious business owner should know that serious legal and financial consequences can result from deceptive advertisements and that careful attention should be paid to the various state and federal laws that control the parameters of acceptable advertising.

Depending on the means through which—and where—a marketing campaign is carried out, numerous laws can come into play in determining the requirements for a liability-free campaign. These laws are too numerous and complicated to be adequately explained in this posting; however, some of the major laws are briefly described below:

Federal Trade Commission Act (FTC Act): Among other things, the FTC Act requires that advertisements are truthful and non-deceptive, advertisers back up their claims with objective evidence, and that advertisements are not unfair. The FTC Act also places restrictions and requirements on the use of testimonials and endorsements.

Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM): This regulation applies to email and mobile service commercial messages (MSCM) -- essentially an email message sent to a wireless device). CAN-SPAM has many requirements, including restrictions that the email does not have a false or misleading subject line or header information, is clearly identified as an advertisement, contains the sender's postal address, and clearly states an opt-out method. In addition, the sender needs prior express authorization from the intended recipient before sending the MSCM.

Telephone Consumer Protection Act (TCPA): This act makes it illegal to “call” (including texting) individuals through an automatic dialing system without their prior express consent.

Ohio Consumer Sales Practices Act: This act covers, among other things, deceptive advertisements for goods and services for personal, family and household use. In order for a class action lawsuit to be based on an OCSPA violation, the plaintiff must show that the defendant had prior notice that its conduct was deceptive. This notice can be in the form of a rule adopted by the Ohio Attorney General or in a publicly available judicial decision of an Ohio court. The Ohio Attorney General maintains the Ohio Public Inspection File, which functions as a database of prohibited conduct for which prior notice exists.

Recently, a federal court in California refused to dismiss a putative class action case against a home warranty company based on the company's allegedly misleading advertisement which a recipient claimed violated the California Business and Professional Code. The advertisement at issue was an email with the subject line: “Roof Repair Made Easy.” Two hyperlinks were provided in the body of the email, both of which linked to an application for a home warranty with the defendant company. In refusing to dismiss the case, the court held that a recipient of the email might reasonably feel misled by it, thereby resulting in potential liability to the company. While there has not yet been decision by the court on whether or not to certify the case as a class action, the defendant company could possibly face liability in the eight-figure range.

Given the plethora of federal, state and even foreign laws that can potentially impose liability on a business for an improper or deceptive marketing campaign, business owners should consult legal counsel when developing any advertisements. Ensuring that a marketing campaign is liability-free is well worth the initial costs, especially considering the substantial financial consequences that accompany running afoul of the relevant laws. Effective advertising is a hallmark of a successful business; deceptive advertising, however, carries the risk of potentially ruinous liability and should be avoided by taking careful consideration of the many applicable laws.

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